861 F.3d 644
7th Cir.2017Background
- GM entered two secured transactions: a 2001 $300M "synthetic lease" (Mayer Brown represented GM; JP Morgan represented lenders) and a 2006 $1.5B term loan (different lender group; JP Morgan as agent).
- In preparing the 2001 payoff (Oct. 2008), Mayer Brown drafted a UCC-3 termination that mistakenly included the 2006 loan’s UCC-1, and the termination was filed.
- Simpson Thacher (counsel for JP Morgan/lenders) reviewed Mayer Brown’s drafts and approved the filing; neither firm caught the error.
- GM later filed bankruptcy (2009). The Second Circuit held the 2006 security interest was in fact terminated by the UCC-3. In re Motors Liquidation Co. II, 777 F.3d 100 (2d Cir. 2015).
- Lenders (plaintiffs) sued Mayer Brown for legal malpractice and negligent misrepresentation, alleging Mayer Brown owed them a duty; the district court dismissed for failure to state a claim.
- The Seventh Circuit affirmed, holding under Illinois law Mayer Brown owed no duty to these third-party non-clients.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mayer Brown owed a duty to plaintiffs as actual clients of Mayer Brown (JP Morgan was a Mayer Brown client in other matters) | JP Morgan was a longstanding Mayer Brown client; therefore Mayer Brown owed JP Morgan (and indirectly its principals) a duty of care | A firm’s representation of a client in unrelated matters does not create a duty in a separate adverse matter; conflict waivers and screening are routine and limit duties | Held: No duty — plaintiffs are third-party non-clients as to the 2001 payoff; unrelated client status does not create a duty |
| Whether Mayer Brown voluntarily assumed a duty by drafting termination documents such that plaintiffs could justifiably rely | Mayer Brown undertook drafting UCC-3s and thus voluntarily assumed responsibility; plaintiffs could have relied | Drafting a first draft for the opposing side and providing drafts for review is not a formal undertaking like an opinion letter; no plausible voluntary-assumption allegation | Held: No — Pelham’s ‘‘voluntary undertaking’’ dictum does not apply here; drafting checklists/drafts is insufficient to create duty |
| Whether Pelham’s "primary purpose" exception applies (i.e., Mayer Brown’s work was primarily intended to benefit/influence JP Morgan and thus plaintiffs) | The primary purpose of Mayer Brown’s work was to effect the payoff and thereby influence JP Morgan to approve the documents | The payoff was adversarial/sophisticated with each party represented by counsel; primary purpose was to serve GM, not to benefit non-clients | Held: No — plaintiffs failed to plausibly allege the Mayer Brown-GM relationship had the primary purpose of benefiting/influencing non-clients |
| Whether plaintiffs’ claims (malpractice and negligent misrepresentation) survive despite being non-clients | Plaintiffs argued established exceptions (opinion letters, intended beneficiaries, wrongful-death distributive duties) should extend to them | Illinois law confines third-party duties to narrow categories (e.g., intended will beneficiaries, opinion-letter recipients, wrongful-death distribution) | Held: No — Illinois law limits attorney duties to narrow third‑party classes; plaintiffs do not fit those categories |
Key Cases Cited
- Pelham v. Griesheimer, 440 N.E.2d 96 (Ill. 1982) (Illinois Supreme Court articulates "primary purpose" test for attorney duty to third parties)
- Geaslen v. Berkson, Gorov & Levin, Ltd., 613 N.E.2d 702 (Ill. 1993) (third‑party recipients of formal opinion letters may be owed attorney duty)
- First Nat'l Bank of Moline v. Califf, Harper, Fox & Dailey, 548 N.E.2d 1361 (Ill. App. 1989) (borrower’s counsel owed no duty to lending bank; primary‑purpose test applied)
- In re Motors Liquidation Co. II, 777 F.3d 100 (2d Cir. 2015) (UCC‑3 termination was effective; established that 2006 security interest was terminated)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must allege factual content permitting plausible inference of liability)